More evidence that what we are all seeing in the trenches of Silicon Valley is also being reflected in the industry data. I've been telling everyone I know that the venture industry (which includes the VC's firms as well as the entreprenuer's and their companies) is as healthy as it's been in recent memory. It continues to feel very much like 1997-1998 (prior to the bubble). Yes, there are also signs of "bubblish mentality" through some recent fundings (VC bets), but only 1-off stories for now and it feels like the hard lessons of the past have indeed been learned in better fundings and better management.
RETURN ON FUNDINGS NEARLY 20 PERCENT IN FIRST QUARTER
By Matt Marshall Mercury News
Venture capital firms continued to show strong gains through the first three months of 2006, showing that the Silicon Valley formula of placing bets on young companies is still paying off.
According to data released this week from Thomson Financial and the National Venture Capital Association, venture funds pulled in annual returns just shy of 20 percent, approaching the high end of the 10-year average. That was up from 13.3 percent in the fourth quarter of 2005, and 4.6 percent a year ago.
How long the healthy returns last may depend on the future health of the market for initial public offerings of stock, which has been flagging lately. If the growing fleet of venture-backed start-ups can't successfully go public and offer shares for sale in the market, venture returns will slow.
NOTABLE FUNDINGS AND FACTS FROM Q2 2006
$100M rounds of investment are increasing. This is a significant indication that large dollars from smart VC's are betting that these companies will be worth at least $1B which could foretell the return of a healthy IPO market in the next 18 months (end of 2007/2008)
Altra, a Los Angeles biofuel company, has raised $120 million in a second round of funding. It is one of the largest rounds of funding ever raised by a renewable-fuel company. Limelight (an Akamai competior) that is the technology backend supporting YouTube and other internet video streaming also raised +$100M in Q2 2006.
I've also heard several indications of $50M Series A fundings that will develop starting in Sept 2006 from several promising startups going after big markets requiring large investments.
Doll Capital Management, a Menlo Park venture capital firm that has recently invested aggressively in China, has raised a new fund of $500 million to invest in fresh companies. It has offices both here and in Beijing, and also invests in Japan.
TVC raised one of the the largest ever funds in Q2 2006 at 1.5 Billion. Total Funds raised by VC Firms in Q2 2006 was almost $6.5 Billion.
Venture capital investment in Startup and Early Stage companies remained flat from the prior quarter in terms of dollars but increased 13% in the number of deals to $1 billion going into 268 deals, suggesting that VCs are offering smaller rounds to more companies. Average post-money valuations of Early Stage companies dipped slightly to $14.06 million for the 12 months ending Q1 2006.
Funding for Expansion stage companies hit the highest investment level in four years, reaching $2.9 billion, a 17% increase over the prior quarter. The number of deals rose slightly to 329, a 6% increase from Q1. The average post-money valuation for Expansion Stage companies increased to $59.16 million
The number of companies receiving "First Time Financing" reached a five-year high in Q2 2006 with 282 companies receiving $1.3 billion. This increase coincides with the recent fundraising cycle and reflects the opportunity to deploy funds into first-time companies early in a fund's life.
Source = NVCA (National Venture Capital Association) Data.
The Silicon Valley startup market is on a healthy pace of company creation, job/employment creation and once again provding the underpinnings for the next successful round of public companies.